JAPAN HOTEL REIT INVESTMENT CORPORATION
June 25, 2014
REIT Issuer:
Japan Hotel REIT Investment Corporation (TSE code: 8985）
Yukio Isa, Executive Director
Asset Management Company:
Japan Hotel REIT Advisors Co., Ltd.
Hisashi Furukawa, Representative Director and President
Contact:Kazuyuki Udo Director and Officer
Management & Planning Office
TEL：+81-3-6422-0530
Notice Concerning Acquisition of New assets ("Best Western Hotel Sapporo Nakajima Koen" )
This is to inform you that Japan Hotel REIT Advisors Co., Ltd., the asset management company of Japan Hotel REIT Investment Corporation (hereinafter called "JHR") has resolved to acquire the property below (hereinafter called "New asset") today on behalf of JHR.
1. Summary of New asset
Name of New assets | Best Western Hotel Sapporo Nakajima Koen |
Category of New assets | Beneficial interest in trust and movable assets of hotels |
Asset type | Hotel |
Classification | Limited service hotel |
Grade | Mid-price |
Rent type | Variable rent |
Purchase price (*1) | JPY6,797,000,000.- |
Conclusion of Sale and Purchase Agreement (*2) | June 25, 2014 |
Scheduled acquisition date | July 9, 2014 |
Seller (*3) | Global Asset Twenty One Holding Specified Purpose Company |
Hotel tenant | Godokaisha Sapporo Hotel Holding (*4) |
Acquisition funds (*5) | Borrowing and cash on hand |
Collateral | Requested |
(*1) The purchase price is the scheduled price on the purchase and sale agreement. The purchase price does not include
expenses for acquisition, fixed asset tax, city planning tax and consumption tax, etc.
(*2) Condition precedent has been concluded with the seller to acquire the New asset on the acquisition date above.
See "10. Condition Precedent" below for detail. (*3) See "6. Seller summary" for detail
(*4) Hotel Management Japan Co., Ltd., interested party of JHR, is scheduled to acquire100% employees' shares of
Godogaisha Sapporo Hotel Holding on the acquisition date above. (*5) See "Notice Concerning New Loan" dated today for borrowing.
2. Rationale for acquisition
JHR intends to provide investors with attractive investment opportunities in hotels that accommodate both stability and upside potential. We decided to acquire the New asset, as it is the asset which benefits this policy for the following reasons.
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(1) The asset is located in Sapporo and capable of attracting both domestic and international leisure travelers.
Stable revenue as well as revenue enhancement in future can be expected.
(2) The New asset will fill a blank of JHR's strategic investment area. Portfolio quality will be improved further through dispersing and expanding assets.
(3) The New asset will contribute to improve and stabilize dividend per unit (DPU).
3. Feature of the New asset
(1) Feature of the New asset
The New asset is a limited-service hotel two minutes on foot from "Nakajima Koen" station of subway. It faces large street and is highly visible. "Nakajima Koen" station is the third station from "Sapporo" station of JR line, the center of the traffic, and it takes approximately ten minutes on foot from the New asset to the center of Susukino, an entertainment district. The New asset is situated at extremely convenient area.
The biggest feature of the New asset is guest room composition. The hotel has 278 guest rooms and all guest rooms are either twin room or double room with more than 30 square meters. A new building constructed three years ago and relatively large guest rooms are extremely strong competitiveness in addition to good access to station.
The New asset has already been successful in attracting both domestic and international business and leisure customers and enjoyed very high occupancy rate (around 90%) throughout 2013, the third year after the opening in 2010. Sapporo is not only a place for business but also a very popular travel destination among domestic and international travelers. Therefore, further upside is expected through increasing DOC(*) by taking advantage of large guest rooms and attracting more international travelers in addition to growth of Sapporo market itself.
(*) DOC: Double occupancy which represents average number of guests for one room.
(2) Allure of Sapporo market
According to the market report made by KPMG FAS dated May 2014, Sapporo city to which the New asset belongs to has approximately 2 million people as of March 2014. Following Tokyo (23 wards only), Yokohama, Osaka and Nagoya, Sapporo is the fifth biggest city designated by ordinance. Population growth ratio for the past ten years follows those of Fukuoka and Osaka. Moreover, in terms of the number of
headquarters of public companies, Sapporo is ranked 8th in Japan. The number of passengers in Chitose
Airport, entrance to Sapporo, is approximately 17 million people and is likely to increase. Domestic flights account for 94% in Chitose Airport but LCC (low cost carrier) for Korea also went into service in 2011 and the number of international flights has been increasing. LCC for domestic flights went into service in 2012 and increase in domestic travelers is expected as well. Furthermore, a new bullet train, "Hokkaido Shinkansen" is scheduled to be opened between "Shin-Aomori" station and "Shinhakodate Hokuto" station on
2015 and more sightseers are expected to visit Sapporo. Hokkaido Shinkansen is schedule to be extended to
Sapporo on 2035. This extended railroad line will be eventually connected to the existing railroad from Tokyo, and if it is realized, this will contribute to the medium to long term growth of tourism industry in future.
With respect to sightseeing, Sapporo received 13 million visitors in the fiscal year 2012 and the number of travelers is increasing. Those who come from other areas of Hokkaido, those who come from other areas from Japan except for Hokkaido and international travelers account for 67%, 28% and 5%, respectively. Recently, international travelers are markedly increasing and the total number of travelers from Taiwan, Hong Kong, China and Korea account for 75% of all international travelers. Approximately 10% of those who visit Japan visit Sapporo and they are expected to increase further. During the first half of 2013, the number of international travelers who visited Sapporo increased by 48.3% compared with the same period previous
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year, and those who come from countries to which government had eased visa requirements in July 2013, Thailand, Malaysia, and Indonesia, showed significant increase of 50%. The peak season of Sapporo market for both domestic and international travelers is August. Additionally, January and February are another peak season for international travelers, and it is expected to cover decrease in domestic travelers during this period.
With respect to hotels in Sapporo, the number of guest rooms has been flat since 2010. It was approximately
28,000 guest rooms in 2012. According to the market report made by KPGM FAS, there is only one hotel
(limited service hotel with mainly single rooms) that plans to make inroads into this market as of today. Considering expected growth of demand, limited new supply is anticipated and the market is deemed to be stable market.
(3) Implementation of variable rent scheme
As reported on above-mentioned "2. Rationale for acquisition", "3. (1) Feature of the New asset", and "(2) Allure of Sapporo market", the hotel revenue of the New asset is stable and further growth is expected. In order to enjoy fruits of improved hotel revenue, JHR plans to manage the New asset with variable rent scheme.
The variable rent amount of the New asset is as follows:
92% x Revised GOP *
*Revised GOP: GOP - Expenses that are not included in calculation for GOP but necessary for operating hotel such as fees for operator and office tax, etc.
(*) Gross Operating Profit: It is a representative management index for hotel operational abilities. Total departmental profits of hotel business (e.g., room sales, food and beverage sales, sales of goods and others) - Non allocated operating expenses (Administrative expenses such as labor cost or utilities cost that are not included in operating expenses of each department)
4. Portfolio after acquisition of the New asset
Last forecast
(*1)
Acquisition of new asset
After acquisition of new asset (*2)
27 1 28Purchase price
(plan) JPY1M 157,632 6,797 164,429
Appraisal value JPY1M 165,537 6,840 172,377
NOI yield % 6.5 6.4 6.5
NOI yield after depreciation
% 5.0 5.3 5.0
LTV (purchase price)
% 46.9 49.0
Appraisal LTV % 44.6 46.8
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(*1) LTV (Purchase price) and Appraisal LTV were calculated with interest-bearing debts as of the end of June 2014. (*2) Impact of this acquisition was calculated based on the premise that the New asset will be held throughout 2014.
5. Detail of the New asset
See attachment 1, "Detail of the New asset".
6. Summary of seller
Name | Global Asset Twenty One Holding Specified Purpose Company | |
Headquarter | 6-56-15 Kameido, Koto-ku, Tokyo | |
Representative | Kazuhiro Matsuzawa, Director | |
Capital | JPY100,000.- | |
Establishment | July 13, 2007 | |
Major business | 1. Transfer, management and disposition of specific assets according to the asset securitization plan pursuant to Act on Securitization of Assets. 2. All accompanied and related works required for securitization of specific assets above. | |
Relationship between the seller and JHR and its asset management company | ||
Capital relationship Human relationship Business relationship | JHR and its asset management company do not have any capital, human and business relationships that should be statutory reported with the seller. The related parties of JHR and its asset management company do not have any capital, human, and business relationships that should be specifically reported with the related parties of the seller. | |
Related parties | The seller does not come under the related parties of JHR and its asset management company. Related parties of the seller do not come under the related parties of JHR and its asset management company. |
7. Status of the property buyer
There is no information that is statutory requested to report.
8. Summary of the intermediary
None
9. Transaction with the interested parties
On the scheduled acquisition date, 100% shares (employees' shares) of hotel lessee, Godokaisha Sapporo Hotel Holding will be acquired by Hotel Management Japan Co., Ltd. Pursuant to Article 201 of Act on Investment Trusts and Investment Corporation and Article 123 of the Enforcement Order of Act on Investment Trusts and Investment Corporation, Hotel Management Japan Co., Ltd. comes under the interested party, etc. as well as sponsor related party in accordance with Code for Transaction with Sponsor Related Party, an internal rules of the asset management company. Therefore, the asset management company has followed appropriate procedure (*) for the sponsor related transaction prior to concluding building lease agreement for the fixed period with the hotel lessee.
(*) Taking approvals from compliance committee that includes outside experts and board of directors meeting of JHR.
10. The agreement with condition precedent
In order to ensure acquisition of the New asset, JHR concluded the agreement with conditions precedent with the seller today. This agreement contains the special conditions where completions of financing or
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fundraising to acquire the New asset (see our press release "Notice Concerning New Loan" dated today) is stipulated as the condition precedent to the effectuation of the agreement. In the even that JHR does not complete financing or fundraising for the New asset, the transfer agreement with condition precedent will be invalid without payment of penalty. JHR believes neither finance nor dividend source of JHR will be seriously impacted.
11. Settlement method
JHR will make payment through new loan and cash on hand, etc.
12. Schedule until settlement date
Resolution for the acquisition | June 25, 2014 |
Conclusion of Sale and Purchase Agreement | June 25, 2014 |
Settlement and transfer | July 9, 2014 (plan) |
13. Future prospect
With respect to operating forecast for the period ending December 2014 (January 1, 2014 through December
31, 2014), acquisition of the New asset has only slight impact and no change is required.
*Website of Japan Hotel REIT Investment Corporation: http://www.jhrth.co.jp/
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Property No. 33 | Property name | Best Western Hotel Sapporo Nakajima Koen |
1．Asset summary (*1) Asset category | Real estate beneficial interest in trust and movable assets (FF&E) attached to the hotel | |
Acquisition date | July 9, 2014 (plan) | |
Purchase price | JPY6,797,000,000.- | |
Appraisal value | JPY6,840,000,000.- (See reference 1 for detail) | |
2．Summary of real estate Intended use of the property | (or trusted real estat | e) (*2) Hotel / Limited service hotel |
Ownership
Land
Building
Land Ownership
Building Ownership
Plot No. 10-10, 10-11, 10-16 and 10-17, Minami 8jo Nishi 3-chome, Chuo-ku, Sapporo, Hokkaido
Address 10-10 Minami 8jo Nishi 3-chome, Chuo-ku, Sapporo, Hokkaido
Acreage 2,515.22 ㎡
Zoning, etc. Commercial district, Semi-fire preventive district, Parking lots development district, Area for landscape planning
Building-to-land ratio 100％
Floor area ratio 600％
Structures and stories Reinforced concrete building with flat roof. Sixteen stories above ground with one story below ground.
Intended use Hotel
Completion July 2010
Total floor space 14,992.49㎡ (*3)
Designer Urban Design System Co., Ltd., Sapporo Office (present USD Ltd.) PhilDo Co. Ltd.
Constructor Taisei Corporation, Sapporo office
Institute that confirmed building Center of International Architectural Standard
Present owner Trustee: Mitsubishi UFJ Trust and Banking Corporation
Beneficiary： Global Asset Twenty One Holding Specified Purpose Company
3. Traffic (*4)
Approximately two minutes on foot from "Nakajima Koen" station of subway Nanboku line.
4. Lease status
Total number of tenants 5
Rentable area 14,992.49 ㎡
Rented area 14,896.40 ㎡
Fixed rent JPY26,266,000.-
Annual contractual rent
Deposit and guarantee
Variable rent With respect to the area leased by Godokaisha Sapporo Hotel Holding, rent linked with GOP will be paid.
money Non-disclosure (*5)
Change in occupancy rate for the past five years
― January 2011 to
December 2011
January 2012 to
December 2012
January 2013 to
December 2013
January 2014 to
May 2014
based on area
― 98.3％ 99.4％ 99.4％ 99.4％
5. Related parties for hotel operation (*6)
Hotel lessee Godokaisha Sapporo Hotel Holding
Hotel operator and property manager. K.K. Fino Hotels
6. Hotel website (*7)
http://www.bwhotels.jp/sapporo-nakajimakoen
7. Summary of the building inspection report
Investigation company Tokio Marine & Nichido Risk Consulting Co., Ltd. Investigation date As of May 7, 2014
Urgently required JPY0.-
Repair
cost
Required within one year JPY0.-
Total amount for another 12 years JPY111,834,000.-
Earthquake PML value (*8) 1.0％
8. Special remark (*9) None
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(*1) Asset summary
Asset category indicates category of real estate, etc.
Purchase price is the price stated on the Real Estate Purchase and Sale Agreement and does not include various expenses required to acquire the New asset (e.g., broker's fee).
(*2) Real estate (or trusted real estate) summary
Structure and stories, intended use of the building and completion of the building are taken from the real estate registration statement. However, if erroneous information is identified by investigation, correct information is stated.
Zoning, etc. (zoning, special zoning, fire preventive district, fire area and semi-fire preventive district) are stated based on
Article 8, Clause 1-1,Clause 2, and Clause 5 of City Planning Act. (*3) Total floor space
The total floor space includes accessory building (car park), 92.51m2. (*4) Transportation
It is according to the information on the present operator's website.
(*5) Deposit and guarantee money
Deposit and guarantee money are not disclosed, as tenant and hotel lessee do not agree with disclosure. (*6) Related parties for hotel operation
Hotel lessee indicates a lessee JHR has scheduled. Hotel operator and property manager indicate operator to be entrusted by lessee and property manager to be contracted by trustee, respectively.
Hotel lessee has concluded the management agreement with hotel operator who affiliates with Best Western, the worldwide hotel chains.
(*7) Hotel website
It is a website address of the present operator. (*8) PML
PML (Probable Maximum Loss) is the anticipated damage ratio resulted from earthquake. Since no uniform definition has been made yet on PML, we used the following method. Probability and anticipated loss amount caused by the various
earthquakes that may occur in another 475 years are evaluated and statistically processed to identify the anticipated
percentage of loss amount against the building replacement cost. It has been calculated based on site inspection, assessment of building condition, confirmation of the consistency with the design document, ground investigation, local factors and structural investigation. Indicated PML is the PML on valuation detail (Phase 2) of the investigation company.
(*9) Special remarks
In principal, following is stated (1) Right or restriction based on the right of the third party except for tenant of the building (2) Important matters stipulated by the management rules, agreement or memoranda concluded with other co-owners of the strata-titled building and shared land, (3) Important restrictions stipulated by the administrative law to this property.
(*10) All numbers less than JPY1000 is rounded down.
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Local characteristics |
The New asset is a limited service hotel constructed three years ago. It is situated in Chuo-ku, Sapporo and two minutes on foot from "Nakajima Koen" station of subway Nanboku line which is the third station from JR Sapporo station, a center of traffic. The hotel is also near Susukino, an entertainment district with many restaurants and bars, and it takes only less than ten minutes on foot form the hotel to the center of Susukino district. Location is extremely convenient. The New asset is also near Sapporo North IC and guests do not have to go through crowded Sapporo station area to come to the New asset. The New asset is equipped with exclusive car park for hotel guests, and it must be extremely convenient for business customers or those who travel around Hokkaido by car. |
Market summary |
As of March 2014, Sapporo has approximately 2 million people following Tokyo (23 wards only), Yokohama, Osaka and Nagoya, and Sapporo is the fifth biggest city designated by ordinance. With respect to the population growth ratio for the past ten years, growth of Sapporo is ranked 3rd following Fukuoka and Yokohama among cities designated by ordinance. Moreover, the number of headquarters of the public companies in Sapporo is ranked 8th in Japan. In 2012, 13.04 million people visited Sapporo and the number of visitors increased by 870,000 compared with the previous year. The actual number of visitors to Sapporo during April 2013 through September 2013 exceeded that of the same months previous year. Those who come from Hokkaido, those who come from other areas of Japan, and international travelers account for 67%, 28% and 5%, respectively. Recently, the number of international travelers has sharply increased. Not only government's policy to promote inbound travels such as easing visa requirements for some Asian countries but also depreciation of the yen and increase in available seats of LCC will contribute to expected growth of Sapporo market. Meanwhile, growth of hotel guest rooms has been flat since 2010 and the number of hotel guest rooms as of 2012 was 28,000. As of today, according to the publicly disclosed information, only one limited-service hotel with mainly single rooms will make inroads into Sapporo and the number of new supply in Sapporo market is limited against expected growing demand. Sapporo market is deemed to be stable. |
Map around the New asset |
(*) The above "Local characteristics" and "Market summary" are extracted or summarized information of real estate appraisal report and market research report made by Japan Real Estate Institute and KPMG FAS, respectively.
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External appearance
Lobby Restaurant
Premier King Room
Superior Twin Room
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Best Western Hotel Sapporo Nakajima Koen
Summary of real estate appraisal report | |
Appraiser | Japan Real Estate Institute |
Date of appraisal | May 26, 2014 |
Appraisal value | 6,840,000,000 |
Price based on income | 6,840,000,000 |
Price by direct capitalization method | 6,880,000,000 |
Gross income | 470,003,000 |
Rent income | 469,954,000 |
Fixed rent | 32,015,000 |
Variable rent | 437,939,000 |
Other income | 49,000 |
Total cost | 48,860,000 |
Net operating income (NOI) | 421,143,000 |
Net cash flow (NCF) | 405,972,000 |
Cap rate | 5.9% |
Price by DCF method 6,790,000,000
Discount rate 5.7% Terminal cap rate 6.1%
Price based on the integrated value | 4,240,000,000 |
Land price | 1,169,392,000 |
Building price | 3,058,651,000 |
Price of FF&E | 11,956,000 |
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J JAPAN HOTEL REIT
<Reference 2> The portfolio list after acquisition of the New asset
No. | Hotel | Type | Grade | No. of guest rooms ('1) | hea ('2) | Comptetion | Acquisitian pnce (.PY1M)(3' ) | hv estm9nt ratio ('4) |
1 | Kobe Meriken Park OrientaiHotel | Full-service | Upper-m iddle | 319 | Kansai | Juty 1995 | 10,900 | 6.6% |
2 | OrientaiHotel Tokyo Bay | Full-service | Mid-price | 503 | Kanto (excluding Tokyo) | May 1995 | 19,900 | 12.1% |
3 | Nam ba Orientai Hotel | Linited-selìlice | Mid-price | 257 | Kansai | March 1996 | 15,000 | 9.1% |
4 | HotelNikko Alivila | Resort | Luxury | 396 | Okinawa | April1994 | 18,900 | 11.5% |
5 | OrientaiHotelHiroshima | Full-service | Upper-m iddte | 227 | other | September 1993 (Extended in September 2006) | 4,100 | 2.5% |
6 | Ibis Tokyo Shinjuku | Lni ited-selìlice | Mid-price | 206 | Tokyo | September 1980 | 7,243 | 4.4% |
8 | The Beach Tower Okinawa | Resort | Mid-price | 280 | Okinawa | Mareh 2004 (Extended in June 2005 and May 2006) | 7,610 | 4.6% |
9 | Hakone Sets ugetsuka | Resort | Mid-price | 158 | Kanto (excluding Tokyo) | October 2006 | 4,070 | 2.5% |
10 | Dorm y Inn Kumamoto | Limted-service | Mid-price | 294 | Other | January 2008 | 2,334 | 1.4% |
12 | Dorm y Inn Suidobashi | Lri rited-selìlice | Economy | 99 | Tokyo | August 1986 (Extended in September 1989) | 1,120 | 0.7% |
13 | Dorm y Inn EXPRESS Asakusa | Lni ited-service | Economy | 77 | Tokyo | March 1997 | 999 | 0.6% |
14 | Hakata Nakasu Was hington Plaza | Lni ited-service | Mid-price | 247 | Olher | March 1995 | 2,130 | 1.3% |
15 | Nara Was hington Hotel Plaza | Linited-selìlice | Mid-price | 204 | Kansai | Mareh 2000 | 2,050 | 1.2% |
16 | R&B HotelUeno-Hirokoji | Lri rited-service | Economy | 187 | Tokyo | April2002 | 1,720 | 1.0% |
17 | R&B HotelHigashi-Nihombashi | Limted-service | Economy | 203 | Tokyo | March 1998 | 1,534 | 0.9% |
18 | Comfort Hotel Tokyo Higas hi-Nihom bashi | Linited-selìlice | Economy | 259 | Tokyo | January 2008 | 3,746 | 2.3% |
19 | Comfort Hotel Shin Yamaguchi | Lri rited-service | Economy | 139 | Olher | August 2007 | 866 | 0.5% |
21 | Daiwa Roynet HotelAkita | Limted-service | Economy | 221 | other | June 2006 | 1,760 | 1.1% |
22 | Sm ile HotelNihom bashi-Mitsukoshim ae | Lni ited-selìlice | Economy | 164 | Tokyo | March 1997 | 2,108 | 1.3% |
23 | Hotel Sunroute Niigala | Limted-service | Mid-price | 231 | Olher | August 1992 | 2,105 | 1.3% |
24 | Toyoko lnn HakataguchiEkim ae | Linited-selìlice | Economy | 257 | other | September 2001 | 1,652 | 1.0% |
25 | Hotel Vista Kamata Tokyo | Lri rited-selìlice | Economy | 106 | Tokyo | January 1992 | 1,512 | 0.9% |
26 | Chisan Inn Kam ala | Limted-service | Economy | 70 | Tokyo | April2003 | 823 | 0.5% |
29 | Hotel Keihan Univers alCity | Resort | Mid-price | 330 | Kansai | June 2001 | 6,000 | 3.6% |
30 | Hotel Sunroute Shimbashi | Lri rited-selìlice | Mid-price | 220 | Tokyo | Mareh 2008 | 4,800 | 2.9% |
31 | Hilton Tokyo BayHotel | Resort | Luxury | 818 | Kanto (excluding Tokyo) | June 1988 | 26,050 | 15.8% |
32 | Ibis Styles Kyoto Station | Lri rited-service | Mid-price | 215 | Kansai | Mareh 2009 | 6,600 | 4.0% |
33 | Bes t Western HotelSapporo Nakajim a Koen | Limted-service | Mid-price | 278 | Olher | Juty 201O | 6,797 | 4.1% |
Total | - | - | 6,965 | - | - | 164,429 | 100.0% |
(*l ) No. ofrooms available to sell as oftoday (room s occupied by hotel fora long term is excluded.)
(*2) Kansai represents Kyoto, Osaka, Shiga, Hyogo, Nara and Wakayan1a prefectures. Kanto (excluding Tokyo) represents Kanagawa, Chiba, Saitama, Ibaragi, Gunma, Tochigi and Yamanashi prefectures. Tokyo and Okinawa represent Tokyo Metropolitan area and Okinawa prefecture respectively.
(*3) The purchase prices stated on the Purchase and Sales Agreement for the Beneficiai Interest in Trust or Rea! Estate Purchase and Sale
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J JAPAN HOTEL REIT
Agreement are indicated (Consumption tax, local consumption tax and the acquisition expense such as broker's fee are not included.). The acceptance prices are indicated for the assets that have been accepted through the merger. The purchase price is indicated for the New asset.
(*4) The percentage of each purchase price to the total purchase price is indicated and the numbers are rounded offto one decimal piace. (*5) Numbers for the disposed assets (No.7, No. 11, No. 20, No. 27 and No. 28) are missing numbers.
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